Bernstein Gets Bullish On Mid-Cap Banks - Fifth Third Bancorp (NASDAQ:FITB), Zions Bancorp (NASDAQ:ZION), Citizens Financial Group (NYSE:CFG), Huntington Bancshares (NASDAQ:HBAN)

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Bank stocks were one of the immediate beneficiaries of the

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"Trump rally" following the 2016 presidential election. But by February 2017, the positive sentiment "drifted out of the stocks," Bernstein's Kevin St. Pierre commented in a research report. Since then, many of the stocks under the analyst's coverage have under-performed, and with valuations of mid-cap banks appearing "more reasonable" today, a change in rating is now appropriate.The Federal Reserve has overseen four rate hikes dating back to the end of 2015, St. Pierre commented. But now investors are questioning the timing of future rate increases and there is a 30-percent probability the Fed won't tighten in December. Nevertheless, mid-cap banks are expected to post positive surprises from NIMs (net interest margins) in the third quarter, which could offset a potential disappointment if the Fed doesn't raise rates.Meanwhile, the likelihood of tax reform from the White House remains a possibility and mid-cap banks are ultimate beneficiaries since they mostly full-payers, the analyst added.Related Link: Oppenheimer Presents New Menu Of Top Picks

"Rolling up rates, regulation, and taxes, we still believe there is more likely to be upside to our '18-'20 estimates than downside, and with the YTD underperformance of the stocks in our coverage, we believe valuations are far more attractive than at the start of the year," St. Pierre wrote.

Rating And Price Target Changes

The following stocks were upgraded:

Citizens Financial Group Inc (NYSE:CFG) was upgraded from Market-Perform to Outperform with a price target raised from $38 to $48.
Huntington Bancshares Incorporated (NASDAQ:HBAN) was upgraded from Market-Perform to Outperform with a price target raised from $15 to $17.
KeyCorp (NYSE:KEY) was upgraded from Market-Perform to Outperform with a price target raised from $21 to $22.

The following stocks were reiterated with a Market-Perform rating but with a revised price target:

Comerica Incorporated (NYSE:CMA) from $78 to $80.
Fifth Third Bancorp (NASDAQ:FITB) from $29 to $31.
M&T Bank Corporation (NYSE:MTB) from $171 to $165.
Synovus Financial Corp. (NYSE:SNV) from $41 to $42.

The following one stock was reiterated with a Market-Perform rating with no price target revision:

Zions Bancorp (NASDAQ:ZION) at $51.